The ongoing actions of the Australian Securities and Investments Commission (ASIC) into the operations of the Shield Master Fund and First Guardian Master Fund has led to court orders being issued against Ferras Merhi, who advised clients to invest in the funds.
The corporate regulator stated the interim orders issued by the Federal Court restrain Merhi from working in financial services after it alleged he engaged in unconscionable conduct, failed to act in the best interests of clients, gave conflicted advice and provided defective statements of advice, while receiving millions of dollars.
Specifically, the orders restrain Merhi, or through his servants, agents or employees, from carrying on any business related to financial products or financial services, providing financial product advice, dealing in financial products, or marketing superannuation or managed investment scheme products.
In making the orders, Justice Moshinsky said the public interest required the injunctions on Merhi to be made given there was a risk that unless restrained he would provide financial product advice in a manner that contravenes the Corporations Act.
ASIC also obtained further orders to appoint a receiver to identify all assets and liabilities of Merhi and provide a report to the court within 90 days.
A provisional liquidator was also appointed to two entities through which Merhi and other financial advisers operated – Venture Egg Financial Services and United Financial Advice –and must report to the court within 28 days on the financial position, solvency and likely returns to creditors of the two businesses, as well as any suspected misconduct by officers.
The orders were sought by ASIC in early September as part of its investigations into Merhi’s connections to the two funds.
In February, the regulator was granted court orders to freeze his property assets and in June cancelled the Australian financial services licence of Financial Services Group Australia, of which Merhi was sole director.
ASIC stated that between 2020 and 2024, Merhi and advisers working for him allegedly advised clients to invest around $296 million of their superannuation into First Guardian and about $230 million into Shield.
In return, Merhi’s businesses allegedly received around $18 million in upfront advice fees and more than $19 million from entities associated with First Guardian for marketing the fund to clients.
